Block Shares Slip After Crypto Winter Dampens Quarterly Results
Block on Thursday reported a loss of 36 cents per share in the second quarter.
Shares of Jack Dorsey-led Block Inc, a digital payments firm that has bet big on bitcoin, declined nearly 7% in premarket trading on Friday after the company reported a loss in quarterly results on waning interest in cryptocurrencies.
The San Francisco, California-based company saw nearly $3.5 billion wiped off its market value by 6:20 a.m. ET. The stock has fallen more than 44% this year.
Block on Thursday reported a loss of 36 cents per share in the second quarter, compared with a profit of 40 cents last year, and said it had slowed hiring and would cut its 2022 investment target by $250 million.
"The act of cutting spend suggests SQ is bracing for potentially weaker growth," JPMorgan analysts wrote in a note.
However, the brokerage maintained its "overweight" rating and $107 price target for the stock, citing underlying earnings potential from its buy now, pay-later business, which earned $150 million in gross profit in the quarter.
Investor enthusiasm over bitcoin and other digital currencies has ebbed this year, as red-hot inflation and the Federal Reserve's tightening of monetary policy have led to a selloff in risky assets.
That has hurt companies such as Block, which rode the bitcoin frenzy to post robust earnings last year.
Block's bitcoin gross profit - or what the company earns from the spread on buying and selling the cryptocurrency - plummeted 24% to $41 million in the quarter from $55 million a year earlier.
"Shares had rallied by almost 35% during the eight trading sessions prior to the print. The company likely would have needed to produce a nearly flawless report in order for that surge to continue," according to analysts at BTIG.
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